Complete Case Digest on NCLT Rulings under the IBC - Part 2

The Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to streamline corporate insolvency resolution, liquidation, and debt restructuring, while ensuring a time-bound process that adequately balances the interests of creditors and debtors.

The National Company Law Tribunal (NCLT) serves as the primary adjudicating authority for corporate insolvency cases, while the National Company Law Appellate Tribunal (NCLAT) hears appeals against NCLT orders, playing a crucial role in refining insolvency jurisprudence.

This case digest is Part 2 of landmark NCLT rulings on IBC reported at Taxscan.in, highlighting interpretations of creditor rights, resolution plans, liquidation procedures, and emerging legal principles. Numerous rulings by the NCLT have served as judicial precedents, offering insights into the methodology adopted by courts to resolve disputes on insolvency timelines, promoter disqualifications, and financial creditor rights.

Unsuccessful Resolution Applicant Cannot Challenge Approval of Resolution Plan by CoC: NCLT

SREI EQUIPMENT FINANCE LIMITED vs VARUTHA DEVELOPERS PRIVATE LIMITED CITATION: 2025 TAXSCAN (NCLT) 101

The National Company Law Tribunal (NCLT) Kolkata bench has held that the unsuccessful resolution applicant has no locus standi to challenge the approval of the resolution plan by the Committee of Creditors (CoC).

The bench of Justice Bidisha Banerjee (Judicial Member) and D. Arvind (Technical Member)l for contention whether the appellant has locus to challenge the approval of Resolution Plan by CoC referred to the NCLAT judgment in M. K. Rajagopalan v. S. Rajendran Resolution Professional VHCPL, 2023 where it was held that “On a careful consideration of the respective contentions advanced on either side, this `Tribunal’, keeping in mind of a vital fact that the `Petitioner / Appellant’, being an `Unsuccessful Resolution Applicant’, has no `Locus’, to `assail’ a `Resolution Plan’ or its `implementation’, coupled with a candid fact that he is not a `Stakeholder’, as per Section 31 (1) of the I & B Code, 2016, to the `Corporate Debtor.”

The Tribunal while rejecting the present application, observed that the applicant who fails in the bid, having participated in the biddings process, cannot challenge the resolution plan which has been approved by the CoC by 100% voting shares.

NCLT dismisses CIRP Application aimed to avoid Income Tax Liability, slaps Rs 1 Lakh Penalty

M/s Jayam Vyapaar Private Limited CITATION: 2024 TAXSCAN (NCLT) 121

The National Company Law Tribunal (NCLT), Kolkata Bench, recently issued a crucial ruling on a Corporate Insolvency Resolution Process (CIRP) petition under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC).

The Tribunal clarified NCLT’s non-function as a recovery tribunal, emphasizing the fraudulent and malicious nature of the applicant’s intention. Referring to legal precedent in Monotrone Leasing Private Limited vs. PM Cold Storage Private Limited, NCLT invoked Section 65 of the IBC, addressing penal action for initiating Insolvency Resolution Process with fraudulent or malicious intent. Invoking Section 65 of the IBC, the court imposed a Rs. 1,00,000/- penalty on the corporate applicant, directing payment to the Prime Minister’s National Relief Fund, subject to a 10% per annum penalty for delays. Consequently, the March 27, 2023, application under Section 10 of IBC was declared not maintainable and dismissed. This decision reinforces NCLT’s commitment to preserving the integrity of the CIRP process, deterring the misuse for non-genuine resolution purposes. It establishes a precedent for upholding the sanctity of the legal and statutory framework surrounding corporate insolvency.

Claim for liquidated damages require adjudication before Civil Court: NCLT dismisses Actor Akshay Kumar’s Insolvency Petition

Mr. Akshay Kumar Bhatia vs M/s Cue Learn Private Limited CITATION: 2025 TAXSCAN (NCLT) 103

Recently the National Company Law Tribunal ( NCLT ), New Delhi bench in a recent case has dismissed petition filed by Bollywood actor Akshay Kumar, seeking initiation of insolvency proceedings against Cue Learn Private Limited, an ed tech company. The Tribunal noted that the claim in question pertained to a breach of contract and was at best, a claim for liquidated damages and such claims require adjudication before a competent civil court and do not constitute crystallized debts that can be pursued under the insolvency resolution process.

A two member bench comprising Justice Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member) found that the claim pertained to a breach of contract and was at best, a claim for liquidated damages. It was observed that such claims require adjudication before a competent civil court and do not constitute crystallized debts that can be pursued under the insolvency resolution process.

CIRP against Himalayan Mineral Waters for Rs 50 Crore default: NCLT directs to initiate Insolvency Proceedings

JAMMU AND KASHMIR BANK vs HIMALAYAN MINERAL WATERS PRIVATE LIMITED CITATION: 2024 TAXSCAN (NCLT) 143

In a significant case, the National Company Law Tribunal ( NCLT ) directed to initiate insolvency proceedings against Himalayan Mineral Waters. The Jammu and Kashmir Bank pleaded for the Corporate Insolvency Resolution Process ( CIRP ) against the corporate guarantor for Leel Electricals as they failed to repay a debt amounting to Rs 50 crore. The default arose from the sale of Leel Electricals’ consumer durable business to Havells India in May 2017 for Rs 1,550 crore. Prior to this transaction, a consortium of banks, led by the State Bank of Bikaner & Jaipur ( now State Bank of India ) provided credit facilities to Leel Electricals, with Himalayan Mineral Waters acting as a guarantor.

A two-member bench of Mr Praveen Gupta, Member (Judicial) and Mr Ashish Verma, Member ( Technical ) found the application under Section 7 fit to be admitted as per Section 7(5)(a) of the Insolvency Bankruptcy Code ( I & B Code ), 2016 and admitted in terms of Section 7(5)(a) of the I & B Code, 2016 against the Corporate Debtor, M/s, Himalaya Minerals Water Private Ltd. Further declared the moratorium in terms of Section 14 of the I&B, Code 2016. The NCLT appointed Bhoopesh Gupta as the interim resolution professional ( IRP ) to oversee the Corporate Insolvency Resolution Process ( CIRP ) for Himalayan Mineral Waters.

NCLT Rules Resolution Applicants Not Liable for Post-Plan Approval Costs Excluded from Corporate Debtor’s Financial Records

Employee’s provident Fund Organisation vs CA Shirley Mathew CITATION: 2024 TAXSCAN (NCLT) 144

In a significant ruling, the National Company Law Tribunal ( NCLT ) of Mumbai bench has held that no liability can be imposed on the Successful Resolution Applicant after the approval of the plan by the Committee of Creditors if such liability is not identifiable from the financial records of the Corporate Debtor.

The NCLT held after the approval of the Resolution Plan by the Committee of Creditors, no additional liability can be imposed on the Successful Resolution Applicant unless such liability is clearly identifiable from the financial records of the Corporate Debtor. The Bench comprising Prabhat Kumar (Technical Member) and Justice Virendrasingh Bisht (Judicial Member) found that the claims for Provident Fund and other employee dues were appropriately considered in the Resolution Plan according to the financial records of the Corporate Debtor. It held that once the Resolution Plan has been implemented, no additional obligations can be imposed beyond what was settled in the approved plan

Company under CIRP obliged to Pay Taxes from the Date of Initiation If the Corporate Debtor is a Going Concern: NCLT

T.R Ravinchandran, RP vs The Asst. Commissioner(ST) CITATION: 2024 TAXSCAN (NCLT) 145

The National Company Law Tribunal (NCLT) ruled that any company that has initiated CIRP can be obligated to pay the taxes from the date of initiation of CIRP, if the Corporate Debtor is to be run as a going concern.

The Tribunal after hearing the arguments further noted that, “As to the dues of the pre-admission period, the creditors, including Tax authorities, are entitled to make a claim against the Corporate Debtor as mentioned in the Insolvency and Bankruptcy Code”. The Tribunal clarified that, “Since law is clear that Tax authorities fall within the ambit of the Operational Creditor, as to the pre-admission claims are concerned, they are at liberty to make their claims before the Resolution Professional instead of insisting upon the Resolution Professional to pay the pre-admission dues before accepting the tax liabilities arising during the CIRP period”.

The Tribunal board consisted of B. S.V. Prakash Kumar and S. Vijayaraghavan.

The Tribunal also added that since Section 238 of the Insolvency and Bankruptcy Code have overriding effect on all other laws which are in contravention to the provisions of the IBC, RI cannot raise an objection as to the absence of provisions in the GST Act or in its software to accept such accounts, the business happening in the market after initiation of CIRP through debtor company will come to stand still and in such situation, no company under CIRP can function as a going concern.

No Challenge on Debt Assignment Deed In CIRP u/s 7 Of IBC: NCLT

CFM Asset Reconstruction Private Limited vs M.G. Finvest Private Limited CITATION: 2024 TAXSCAN (NCLT) 146

The Delhi bench of the National Company Law Tribunal ( ‘NCLT’ ) held that the Debt Assignment Deed cannot be challenged in a Corporate Insolvency Resolution Process ( ‘CIRP’ ) under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( ‘IBC’ ).

A two-member bench comprising Shri Mahendra Khandelwal, Member (J) And Dr Sanjeev Ranjan, Member (T) viewed that the liability of the Corporate Debtor cannot be extinguished simply because CIRP has been initiated against the Principal Borrower. Therefore, this contention of the Corporate Debtor is overruled. Further held that the ‘financial debt’ is not barred by limitation and the submissions of the Corporate Debtor as to the present application being barred by limitation is not sustainable. Hence, in all respects the ‘debt’ as claimed by the Financial Creditor is well within the period of limitation. It is not denied that the Corporate Debtor has committed ‘default’ in repayment of the said ‘financial debt’.

IBC Overrides Provisions of Andhra Pradesh Revenue Recovery Act: NCLT

Punjab National Bank vs NCS Sugars Ltd CITATION: 2024 TAXSCAN (NCLT) 107

The Hyderabad bench of the National Company Law Tribunal ( NCLT ) has held that Insolvency Bankruptcy Code ( IBC ), 2016 overrides provisions of the Andhra Pradesh Revenue Recovery Act, 1864.

A two-member bench comprising Dr Venkata Ramakrishna Badarinath Nandula, Member ( Judicial ) and Sh Charan Singh, Member ( Technical ) observed that merely because, the impugned sale is for the realisation of the areas of the amount due and payable by the corporate debtor to the suppliers of sugarcane, who are farmers and were reportedly agitating, by resorting to Dharanas and Rasta Roko’s, which allegedly resulted in Law & Order problem, the same cannot be the justification, for bypassing/ violating the order of moratorium under Section 14 of the I&B Code Further held that the impugned sale of the property of the corporate debtor, which is undergoing CIRP, under the public auction held on 09.02.2022 under the provisions of AP Revenue Recovery Act, is unsustainable, unenforceable besides null and void, hence the same is liable to be annulled.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates